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Mexican exhibition group Cinepolis, the largest in South America by number of screens, opened its first cinema in the Middle East in Q1 2019, in Bahrain. Located at Atrium Mall, it features a Junior theatre, 4D motion seating and two MacroXE screens with Dolby Atmos. This opening follows a partnership with Al Tayer Group, one of the Middle East's leading luxury and lifestyle retailers, in 2018 to build and operate cinemas in the region. The targeted territories are of the Gulf Cooperation Council: UAE, Saudi Arabia, Bahrain and Oman.

The two groups, together with Al Hokair Group and Lux Entertainment, obtained a licence to operate cinemas in Saudi Arabia and plan to open 300 sites in the next 5 years. Cinepolis has opened the cinema in Bahrain strategically close to the Saudi border and reports that 25% of the audience comes from Saudi Arabia.

Cinepolis operated 722 cinemas with 5,840 screens in 15 territories at the end of Q1 2019, mostly in Central and South America but also in the United States, Spain and India.

Separately, French exhibition group Pathe has opened its first cinema outside Europe, in Tunisia. The multiplex, a first in the country, is in Tunis City and features eight screens. Pathe is reportedly building a second multiplex in the country, in Sousse, and another one in Morocco. This follows the establishment of Pathe Californie Casablanca in Morocco, a sister entity to operate in the region.

Pathe operated 1,104 screens in Europe at the end of 2018, in France, Netherlands, Switzerland and Belgium.

Our analysis

Middle East territories tracked by IHS Markit grew an estimated 6% in 2018 in number of screens. Vox cinemas is the largest exhibitor group in the region with 311 screens and 22.4% combined market share in the eight markets it operated in Q4 2018, according to Cinema Operators Strategic Intelligence research. Novo Cinemas, owned by Indian group Carnival, is the second largest exhibitor with 124 screens in two territories. Both have also obtained licenses to operate in Saudi Arabia.

From outside the region, AMC and other smaller European and North American exhibitors are looking at Saudi Arabia for expansion, always jointly with local partners. However, it is not clear if also as an entry point to Middle East since all other territories are much smaller in size, only UAE would be of interest but Vox and Novo control over 50% of the market in number of screens.

Cinepolis has operated in India since 2009 and recently acquired a minority stake in Cinemaxx in Indonesia, so it is not foreign to Asian audiences and business practices. Additionally, Middle East is characteristic for embracing 4D and PLF, just as Latin America, opening an opportunity for Cinepolis to expand its expertise managing those formats.

On the other hand, Pathé has been very conservative in its approach to growth and only made acquisitions in France, Netherlands and Belgium, without having ventured outside Europe until now. Historical, cultural and business ties make of North Africa a potentially close market for Pathé to enter but the same differences in habits, purchasing power and culture make it a challenge. In fact, its Tunisian multiplex reportedly costs twice as any other cinema.

Africa in general (with the exception of South Africa) and North Africa in particular remains untapped continent for larger exhibitors. The largest operators in the region are Megarama (Morocco, but also France and Spain) and the only ones operating in North Africa, Ster-Kinekor (South Africa, Zimbawe, Zambia and Namibia) and Nu-Metro (South Africa, Mozambique, Zambia) which operate 657 screens (72 excluding South Africa).